Wells Fargo to boost dividend; analysts react to BofA's larger payout

Lost in all the shuffle yesterday was this piece of local banking news: Wells Fargo & Co. (NYSE:WFC) will increase its dividend to 35 cents per share in the second quarter.

The nickel-per-share increase followed the Federal Reserve signing off on the San Francisco-based bank's capital plan. Wells has been one of the most profitable banks on Wall Street (or Main Street) in recent years as it has successfully dodged the massive legal and trading losses experienced by its top rivals.

Analysts at Keefe, Bruyette & Woods in a research note to clients called Wells Fargo's increase "larger than expected." Wells has 20,500 employees in Charlotte, site of its East Coast operations hub, and numerous local shareholders.

Most observers found banks' capital-plan announcements on Wednesday to meet or fall below expectations.

Charlotte-based BofA announced a dividend increase to 5 cents per share from a penny. The long-awaited hike, though modest, is a boon to thousands of local shareholders who once relied on the quarterly payouts as income.

One local business leader told me Wednesday morning a dividend increase at BofA would be a "red-letter day for Charlotte." Of course, that was hours before Charlotte Mayor Patrick Cannon was arrested and charged in a federal public corruption investigation, which changed the mood around town.

And even BofA's hike came with some disappointment. The bank simultaneously announced it would pay more than $9.3 billion to settle a complaint with the Federal Housing Finance Agency. And the Federal Reserve review of the bank's capital plan indicated the capital payouts may have been reduced from their original intentions after BofA fell short of many peers in last week's stress tests.

"BofA's results were actually lower than we originally anticipated," KBW noted.

The bank's stock opened higher in Thursday morning trading, up 1.34% to $17.41, before falling to $17.12 after 11 a.m.